Zero-hours contracts: Rights, reviews and policy responses

Zero-hours contracts (ZHCs) are widely used in the UK, although their use remains controversial. While Theresa May’s Government took steps to restrict ZHCs being used unfairly, trade unions and the Labour Party continue to call for them to be banned. On 13 August 2019, the Office for National Statistics (ONS) published its biannual statistics on ZHCs, showing a rise in their use – particularly among younger workers.

This
Insight discusses what the statistics show, the rights of those on zero-hour
contracts, and policy responses in the UK and the EU.

What are zero hours contracts?

There is no single definition of a ‘zero-hours contract,’ although since 2015 there has been a limited statutory definition in section 27A of the Employment Rights Act 1996. This defines ZHCs as a contract of employment or workers’ contract where: (i) the undertaking to work is conditional on work being offered; and (ii) there is no certainty that work will be offered.

The
term is most often used colloquially to describe an employment arrangement
where there are no guaranteed hours. Under some contracts, workers may be required to accept any work offered by their
employer, whereas in others, they may choose to turn down the work.

When gathering statistics, the ONS uses a ‘lack of guaranteed hours’ as the defining criterion.

What do the statistics show?

From
April to June 2019 there were an estimated 890,000 workers employed on ZHCs as
their main job. This represents 2.7% of those in employment in the UK.

This
is up by more than 100,000 people from the same period last year, although it
is lower than the peak of 907,000 workers in late 2016.

There
was a notable rise in the number of young workers (aged 16-24) employed on
ZHCs. These numbers are up by 43,000 from late 2018, meaning that 8.8% of
workers in that age group were employed on ZHCs as of June this year.

What rights do zero-hours workers have?

The
employment rights that a person enjoys depends on what their employment status is.

Working
under a ZHC does not determine what employment status a person has, although in
practice, most will be classed as
workers. This means they have access to a limited set of employment
rights, including the National Minimum Wage, paid annual leave and protection
from discrimination.

The Employment Rights Act 1996 now bans the use of ‘exclusivity clauses’ (which prohibit a
worker from working for another employer) for those on ZHCs.

What problems do zero-hours workers face?

The Taylor Review of Modern Working Practices (PDF), published in July 2017, looked at flexible contracts, including ZHCs. It found that while flexibility was valued by many workers, one of the key problems was ‘one-sided flexibility’. For workers, this could mean unpredictable hours and insecure income. The review also found that workers on ZHCs often felt unable to assert their employment rights out of fear that they would be offered fewer or no hours.

The review recommended that workers on
ZHCs should have a right to request stable hours after 26 weeks of working with
their employer. This is similar to existing
rights to request flexible working, which employers can refuse but only on
certain grounds (which are listed in legislation.)

In response to the Government, the Low Pay Commission (LPC) (PDF 598 KB) argued there should be stronger rights to switch to stable hours. An employer could only refuse to permit a switch if they could justify it in line with legislation. In July 2019, May’s Government launched a consultation on measures to address one-sided flexibility (PDF 450 KB) (closing 11 October 2019). It rejected a separate recommendation by the review that non-guaranteed hours should attract a higher rate of National Minimum Wage after the LPC found it would not be effective.

European
Union policy

In July 2019, the new EU Directive on transparent and predictable working conditions came into force. Among other things, the directive requires Member States to introduce a right for workers with unpredictable hours to be given certain information by their employer. This includes the hours during which they may be asked to work and the minimum notice they are entitled to before the start of an assignment. Member States must also require employers to pay compensation to workers if shifts are cancelled after a specified deadline.

However, as the implementation deadline of the directive is August 2022, it
is unlikely to form part of ‘retained EU law’ when the UK leaves the EU.

Unions have been more critical. The TUC, which commissioned its own research on ZHCs, has called for a ban on their use and argue that the rise in ZHCs is because of a failure to tackle unfair employment practices. The Labour Party committed in its 2017 Manifesto to abolish ZHCs. In January, the Shadow Business Secretary, Rebecca Long-Bailey said in the House of Commons that the right to request stable hours is a ‘meaningless proposal’.